Monday, June 7, 2010

TCS may be hit by UK's £6.25-bn cost-cut

S Kalyana Ramanathan / London May 25, 2010

Chancellor George Osborne and his colleagues in the Treasury in the new Conservative-Liberal Democrat government in the UK today presented a long laundry list of expenditure cuts totalling £6.25 billion for 2010-11, including a possible £2 billion cuts in “IT, suppliers and property”. Osborne’s plans to cut government spending comes nearly a month ahead of the first emergency budget the new government will present in Westminster on June 22.

Today’s announcement is the first step taken by the new government to tackle an historically high budget deficit faced by the UK. Budget deficit over the next five years is estimated at £156 billion.

The brunt of expenditure cuts will be borne by business (£836 million), communities and local government (£780 million), Department of Transport (£683 million), education (£670 million), Department of Works and Pension (£535 million) and Department of Justice (£325 million).

Explaining the rationale for the massive cuts, Osborne said there was an urgent need for action in dealing with government debt. “We are all in this together,” he said. Chief Secretary to the Treasury David Laws said, “The years of public sector plenty is over.”

The £2 billion spending cuts comes at a time when there is a widespread speculation that £600 million contract awarded to India’s IT company Tata Consultancy Services for delivering IT solutions for the Personal Accounts Delivery Authority may come under review by the new government. TCS had bagged this order in March this year, when the previous Labour government was in power. Today’s announcement, however, did not dwell on any specific contract or vendors.

A Department of Works and Pension spokesperson later clarified that Treasury’s announcement was not about National Employment Savings Trust (NEST), the scheme for which TCS has been mandated to provide the IT solutions. A DWP spokesperson said, “The government is reviewing all recent spending approvals, to ensure that they are consistent with the government’s priorities and good value for money. “The HMT announcement today covers £535m of efficiencies for DWP. It’s not about NEST,” DWT said.

DWP also said that the austerity measures that would affect this department would include £70 million of savings from stopping or delaying some IT projects and reduced spending on IT consultancy and a further £25 million of savings from renegotiating contracts on medical and IT services.